Do these rule change apply retroactively to EIDL funds already received or approved? I cant speak for the SBA though so if you have specific questions you can ask them. Compare Your Financing Options With Confidence. Id recommend you talk to the SBA, your SBDC or a legal professional. I gotten in my eidil targeted advance loan of the 9K Can I reimburse for the credit cards used? Check with the SBA. Disbursements to owners, partners, officers, directors, or stockholders, except when directly related to performance of services for the benefit of the applicant;. They also correctly observe that the guidance isnt exactly crystal clear, and is especially confusing for independent contractors and the self-employed who may have limited knowledge of small business accounting and terms like working capital that are often associated with financial statements. We reimagined cable. Hi Sam I cant speak for the SBA so I am not comfortable giving specific advice for your situation. I cant speak for the SBA but inventory and even advertising are is normally considered working capital expenses. In your article, your refer to General Accounting Principles (GAP). A certain percentage of my house payment gets written off on my taxes. Thanks for your article and your advice. Great article! We recommend you consult the SBA or your advisors if you have placed EIDL proceeds in an interest-bearing bank account. Irene Im sorry I cant speak to how the SBA will handle each individual case. Can I use the EIDL funds to replace it? If you have questions about your specific situation, we recommend you contact the SBA. The PPP was designed to continue your 2019 payroll for a period . I work for a business that will most likely have enough expenses to account for the use of the EIDL loan that we are getting, however management wants to buy a piece of machinery that we need to continue in business (we had one that was loaned to us an had to be returned). The question in my mind is whether your business needs the funds. More info here. The program has closed to new applications, but nearly four million small business owners received these loans, and not surprisingly many are still paying them back. My understanding is that you need SBA approval if you want to sell the business without repaying the loan in full. This seems to be the case. Instead of applying through the SBA, I applied through a private business lender to help me get through the pandemic. Id suggest you ask the SBA or your tax professional. Paying down $300K of the mortgage will be really helpful for our long-term bottom-line. We cant comment on this scenario unfortunately. That does not appear to be an acceptable use of EIDL funds based on the definition we discussed earlier: Economic injury loan proceeds can only be used for working capital necessary to carry the concern until resumption of normal operations and for expenditures necessary to alleviate the specific economic injury. In addition, if relocation is an ineligible use for an existing business, its doubtful that starting a brand new business would be considered acceptable use. But thank you for the dry reading. He also lost gear due to this. Thank you very much. I did reached out to SBA customer service multiple times by phone and email but they were not sure what calculation method should be used to pay myself as a self-employed. Im glad it was helpful. Both times I have used all of it for business expenses and IRS federal taxes. But Id check with the SBA or your tax professional about any specific questions. In addition, many SBA resource partners such as SBDCs and SCORE are providing assistance with navigating these programs. ; ) But Id recommend you check with the SBA to be sure. Please notice in the EIDL agreement its states: And since you cant relocate it could be an ever bigger issue. 3) we have a roof that needs to be replaced now on on of our older properties. Click the Add Transaction button. may i use funds to repair cosmetic damage to the car? I havent seen that specific question addressed in guidance. I tried to address that question in point #4 in this article. For the second question, I would be very careful. Basically, I went from $165K gross receipts in 2019 to nearly $0 in 2020-21. You may want to check with the SBA if you dont see the deposit soon. I cant speak for the SBA though so I recommend you check with them. Keep in mind we will share and discuss guidance from the SBA here but we cant and dont speak for them. Its doubtful but I dont work for the SBA so Id suggest you check with them. (Again this isnt an official SBA definition.) seems to slightly conflict with the first part and you provided no VERDICT: You state a borrower who doesnt need it should consider returning the funds conflicts with the prior statement It seems reasonable that business owners may continue to use those funds for as long as the crisis continues to impact their operations. I rent spaces now. A February 2021 press release from the SBA statesthat EIDL funding is used to pay fixed debts, payroll and expenses, accounts payable and other bills that cant be paid because of the disasters impact.. Single member LLC, I normally dont take a draw, depending on profits. Disbursements to owners, partners, officers, directors, or stockholders, except when directly related to performance of services for the benefit of the applicant; Repayment of stockholder/principal loans, except when the funds were injected on an interim basis as a result of the disaster and non-repayment would cause undue hardship to the stockholder/principal; Expansion of facilities or acquisition of fixed assets; Repair or replacement of physical damages; Refinancing long term debt (SBA later made an exception here; see that change described below)). Id recommend you talk to the SBA, your SBDC or your tax professional if he or she is familiar with these loans. So sorry. Learn how to monitor the status of your COVID-19 EIDL, make payments, and request servicing actions. This was truly the most helpful informational I have been able to find. Id recommend you contact your local SBA office or resource partner for help. However, I do not speak for the SBA so Id recommend you contact them or a resource partner. Spend more time crushing goals than crunching numbers. If I finance another semi truck can I use the EIDL funds to pay for the down payment, monthly payment, insurance, registration, and/or any maintenance or repairs needed to keep the trucks operating? I have spoken to my CPA but she like you, is still trying to get clarity from the SBA . If you have questions about how you can use EIDl the SBA resource I just linked to should be able to help as well. I got approved for an edil loan can I use those funds to buy more supplies? What You Can't Use An EIDL For Ive almost maxed out my personal credit cards to survive and I owe taxes for last year. If you have specific questions I suggest you reach out to the SBA or an SBA resource partner such as your SBA local office, SBDC or SCORE. There is no prepayment penalty. Two questions, both relating the recent rule changes. Extraordinary items are needs outside of normal operations and directly caused by the disaster. You may be able to get help for free from SBA resource partners. If you have specific questions Id encourage you to reach out to the SBA or an SBA resource partner such as those described in this story. Thank you! Can you please provide any recommendations? Many people want to know, can I pay myself withe the EIDL loan? I received a PPP loan and a EDIL loan. Hi David It is confusing! 1- NO DISBURSEMENT WILL BE MADE LATER THAN 6 MONTHS FROM THE DATE OF THIS And none of the EIDL increase can be used to pay on my existing SBA 7a loan, correct? This business has also been shut down due to the virus. Credit card debt is considered short-term debt and there doesnt seem to be any prohibition against using these funds to pay short-term loans. What I got you cant generate money from EDIL money so how you can pay them monthly installments. Andrew I cant speak for the SBA on this question. Its reasonable to assume that formula could be used to calculate owners compensation for EIDL as well. Use the proceeds however we interpret the rules and hope you dont get audited. My accountant tells me I am OK to use the targeted advance to acquire the new shop space but Im looking for a second opinion. Do not rely on this article for specific information on how to properly spend your EIDL funds. How long does it take for the SBA to actually release the funds after you sign for the Loan ? Ive seen different interpretations of whether we can use our Revenue for items excluded from use from the EDIL. If you do, please come back and share with us what they told you. (Note: the SBA opened up EIDL to, Economic injury may be reduced working capital, increased expenses, cash shortage due to frozen inventory or receivables, accelerated debt, etc, . So technically, the funds would be used correctly. You can use EIDL funds to pay yourself, just use up the PPP money first for that. Does this fit within the guidelines of the loan? 3. Very helpful article Gerri. My suggestion Tom is that you check with the SBA. You could share this article with your accountant for their opinion. But again I dont speak for the SBA. You can absolutely use EIDL money to generate revenues in your business. And if so, can I start paying that employee immediately, or do I have to wait until Ive used up the PPP funds paying myself? But again, I recommend you check with the SBA for specific questions as we cant speak for them. If your car payments are normal business expenses it would seem they would fall under the definition of working capital expenses. Payment Deferral: I know it says paying fixed debt is an acceptable use. I am a family childcare provider who operates in my home. Similarly I would not invest the funds without checking with the SBA. For those who dont pay themselves a salary, you may want to look at what you have taken out in the past as owners draw, disbursements, or as profits. I have a 1 year interest only bridge loan of 75k that has my business building as collateral, I used the loan proceeds to purchase the building one year prior to the EIDL loan. for customers may be normal working capital expenses. Our interest rate is higher than 3.75%, and isnt amortized for 30 years. Can the loan be used to pay myself retroactively from the start of the COVID-19 disaster declaration? I like to resume when situation gets little better. Hope it helps! I found this information and the references to the actual SBA rules very helpful! Start By Doing the Research. note EIDL on those expenditures and keep a file or attach receipts. I am an uber driver. One reader asks whether EIDL can be used to pay shop rent and that seems to be a very reasonable use of working capital funds. (Note in the article where it says: Extraordinary items are needs outside of normal operations and directly caused by the disaster. These might include salaries, inventory, rent, utilities, and short-term debt or long-term debt payments, for example. Is it safe to assume and use the same calculation method as PPP loan by taking the Gross Income on line 7 of Schedule C and divide that by 12 to get the monthly payout amount? Can I please use the loan to pay off my car or pay at least 3/4 of it and use the rest for my business? If you really want to understand these loans, you have to look at the history of this program. thanks. With interest (even though it's a good rate). So my building expenses could be paid with a mixed money EIDL/business monthly income or possibly fully paid with the business monthly income. If you dont use an accounting program its a good idea to keep a spreadsheet listing how you spent these funds. It appears that buying a vehicle does as well, even if it is a business purchase. I mean what if I have an outstanding payment to make can I take 10 000 and but it back without any penalty. But I would recommend you reach out to someone at the SBA or a resource partner (SBDC or SCORE) to find out. Can i used the sba loan for buy two car for my business like uber or taxi? The Interim Final Rule from the SBA describes on the first page which changes are applicable when. Refrain from posting overtly promotional content, and avoid disclosing personal information such as bank account or phone numbers. Is there anyway I can return my EIDL loan money after accepting and signing the document of it? : My entity (C-corp) that is requesting the EIDL loan is operating from a building and pays rent to a separate entity (LLC) that owns the building. The Small Business Administration (SBA) approved over $390 billion in COVID-19 Economic Injury Disaster Loans (EIDLs) to help small businesses during the pandemic. Thats why there are limits on certain types of expenditures; these loans arent meant to expand a business but rather to maintain it. Thank you for your time. Frank My understanding is that the first clause gives you 6 months to accept your EIDL loan. QUESTION is can we use the same company name to invest in another hospitality business? EIDL loans are not forgivable. It doesnt appear to be an ineligible use of proceeds but I cant speak for the SBA so you may want to double check with them. Have a trucking business and the motor blew in the truck. Withe the EIDL funds already received or approved I used the SBA though so I am not giving! Under the definition of working capital expenses the status of your COVID-19 EIDL, make payments, and disclosing. 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